U.S. District Court Judge Jorge Alonso has explained in a new court filing why he switched from siding with two large Chicago suburban health systems that wanted to merge to favoring antitrust regulators that have fought the proposed merger.

The reversal, announced March 7 , stopped the proposed marriage between Advocate Health Care of Downers Grove, the largest hospital network in Illinois, and Evanston-based NorthShore University HealthSystem. Such a merger would have created the nation’s 11th largest nonprofit hospital system.

Basically, Judge Alonso’s decision was that if he let the systems merge, it might have been harder to break them up later and “recreate pre-merger competition.”

Ashish K. Jha, M.D., of the Harvard T.H. Chan School of Public Health and an internist at the Veterans Affairs Boston Healthcare System, argues in a JAMA piece that the insurer withdrawals and big insurance premium increases this year are to no small degree attributable to the market power being wielded by ever larger hospital chains.

He thinks that the future of the Affordable Care Act may rest on the federal government’s ability to monitor and regulate healthcare-industry consolidation among practices, hospitals and hospital systems.

“If the ACA is to thrive under the next president, he or she must ensure that we have a dynamic healthcare marketplace,” Dr. Jha wrote. “For that reason alone, the ability of the ACA to fulfill its promise of greater access at an affordable price will depend as much on the effectiveness of the FTC {Federal Trade Commission} as it will on the effectiveness of the CMS.”

His remarks come as a federal appeals court decided to support the FTC’s challenge of the proposed merger between Advocate Health Care and NorthShore University HealthSystem, both in Illinois.

The 7th Circuit Court of Appeals called a lower court’s decision to allow the proposed merger between the two health systems “erroneously flawed.”

FTC has argued that the deal could hurt both patients and insurers and result in higher medical costs because of the new behemoth’s pricing power. The health systems have been battling with the FTC over how their market share should be defined.

Cleveland Clinic: ”A pioneer in transparency related to demonstrated value and bundled contracts, Cleveland Clinic has combined one of America’s premier multi-specialty group practices with community hospitals and independent physicians to produce a powerful economic engine.”

Geisinger Health System: “It is internationally recognized for innovating at the interface between health insurance, inpatient care, outpatient care and physician practice. Few organizations have positioned themselves as purposefully as Geisinger for the transition from volume- to value-based payment.”

Intermountain Healthcare: “The late W. Edwards Deming, a quality icon, was a central inspiration for Intermountain’s relentless battle to drive out variation. While many health systems treated total quality management and its variants as a passing fad, Intermountain dug in and made it a way of life. The presence of Intermountain contributes greatly to Utah’s position as one of America’s healthiest places to live.”

Mayo Clinic: “Its strength flows, to a great extent, from the team-based multispecialty group practice model that has been central to its operations since its founding, along with its unwavering focus on putting patient interests first. The ‘Mayo way’ is well-engineered and nonnegotiable. No organization has deeper, better-connected data.”

Sentara Healthcare: “When other systems experimented with ownership of health plans, then exited in the face of losses, Sentara persevered. When physician employment became too big a financial burden for others, Sentara doubled down. Because it persisted when others folded, it was able to put more than two decades of experience into its intellectual bank vault. It learned to meld a managed care enterprise, a hospital enterprise, and a physician enterprise into a formidable integrated delivery system.”
To read all of Mr. Beckham’s piece, please hit this link.

The Federal Trade Commission is appealing a federal judge’s decision that denied its request that the judge block the merger of Downers Grove, Ill.-based Advocate Health Care and Evanston, Ill.-based NorthShore University HealthSystem.

The merger would create a health system called Advocate NorthShore Health Partners, with 16 hospitals, more than 4,000 hospital beds and 45,000 employees and serving more than 3 million patients annually.

U.S. District Judge Jorge Alonso’s refusal this week to block a merger between Advocate Health Care and NorthShore University HealthSystem, both in the Chicago area, dealt a hard blow to the Federal Trade Commission’s efforts to rein in consolidation of hospitals. The decision could quickly encourage systems to merge, which could lead to considerably higher healthcare costs as the new entities wield more market power and thus are better able to negotiate with insurers.

It was unclear that the FTC would appeal.

In another similar big case, a federal judge in Pennsylvania refused to stop t a merger between Penn State Hershey (Pa.) Medical Center and PinnacleHealth System in Harrisburg — a decision that the FTC is appealing.

The judge in that case said: “Our determination reflects the healthcare world as it is, and not as the FTC wishes it to be. We find it no small irony that the same federal government under which the FTC operates has created a climate {of cooperation among providers} that virtually compels institutions to seek alliances such as the hospitals intended here.”

Mr. Neaman delivered this news while on the witness stand April 14 in an antitrust hearing over the proposed Advocate-NorthShore merger.

Mr. Neaman testified that he met with Northwestern President and CEO Dean Harrison in late January at the Chicago Club. According to Mr. Neaman, Mr. Harrison said he wanted the FTC to prevail in its lawsuit to stop the merger because Northwestern would like a merger with NorthShore itself.

Mr. Neaman suggested that the FTC would probably block a potential NorthShore-Northwestern merger. “{Mr Harrison} told me not to worry about the FTC. He said Northwestern had a way to get around the FTC.”

The merged entity would include more than 4,000 hospital beds and employ more than 45,000.

Advocate and NorthShore asserted that the proposed merger, which some regulators and others have looked askance as potentially restraining trade and thus raising healthcare costs, would let the combined system create a new insurance product to be priced at least 10 percent below the cheapest comparable plan on the market. The proposed plan would limit access to providers in the Advocate-NorthShore system.

The Federal Trade Commission seeks a preliminary injunction to stop the merger.

“If this merger is blocked, Chicagoland consumers will be harmed by losing the opportunity to save hundreds of dollars per individual in the network every year,” the systems asserted.

The merged entity would include more than 4,000 hospital beds and employ more than 45,000 workers.

Advocate Health Care, Illinois’s largest health system, will buy 56 healthcare clinics that it will operate in Walgreens drugstores in metropolitan Chicago, The clinics will be renamed Advocate Clinics at Walgreens and open under Advocate in May.

Walgreens said that the move is part of its strategy to create “more innovative approaches with health systems.”

Becker’s Hospital Review, citing the Chicago Tribune, reports that Mark Neaman, CEO of Evanston, Ill.-based NorthShore University HealthSystem, has accused the Federal Trade Commission of “gerrymandering”. He complains that the agency is only analyzing a little of the Chicago area’s healthcare market in its fight against NorthShore’s merger with Downer’s Grove, Ill.-based Advocate Health Care.

The FTC asserts that if NorthShore and Advocate merged they would operate a majority of the hospitals in the combined system’s market, composed of northern Cook and southern Lake counties.

However, Mr. Neaman asserted that the combined entity would compete with hospitals throughout the Chicago metro area, not just in northern Cook and southern Lake counties, and it would only have 22 percent of inpatient beds in the six-county metro Chicago market.

The Federal Trade Commission plans to block the combination of two large Illinois hospital groups, showing that the FTC and other agencies are increasingly concerned about the ability of very big health systems to dramatically raise prices through their domination of their markets.

Recent studies that have shown the ability and indeed enthusiasm of big hospital systems for raising prices much more than smaller systems or freestanding hospitals have added fuel to the regulatory fire.

The FTC said that the proposed merger of Advocate Health Care, Illinois’s state’s largest health system, and NorthShore University HealthSystem, could create a 16-hospital behemoth that would dominate the affluent North Shore area of Chicago.

Deborah L. Feinstein, director of the agency’s Bureau of Competition, asserted that the proposed merger would probably significantly increase the combined system’s bargaining power with health-insurance plans, “which in turn will harm consumers by bringing about higher prices and lower quality.”
The hospital groups say they plan to fight the government’s move, citing the effects of the Affordable Care Act in encouraging coordinating services and technology.

Besides the Illinois case, the FTC just in the past three weeks has moved halt the merger of two hospitals in West Virginia and joined with Pennsylvania authorities to try to stop an agreement between Penn State Hershey Medical Center and PinnacleHealth System.

The New York Times reported that James H. Skogsbergh, Advocate’s chief executive, defended the merger plan as “good for consumers and very pro-competitive.” asserting that because the hospitals’ market was dominated by a major insurer, — Blue Cross Blue Shield — the systems were “price takers, not price setters.”